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By XE Market Analysis February 6, 2014 2:48 pm
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    XE Market Analysis: Asia - Feb 06, 2014

    The dollar was mixed in early N.Y. trade, driven largely by mixed data, and the ECB's unchanged policy announcement. EUR-USD led the charge, as that pairing rallied from 1.3495 lows to a peak near 1.3620. Meanwhile, a solid equities bounce helped USD-JPY touch 102.00, after posting lows near 101.25. USD-CAD was up on a larger Canadian trade deficit, while cable more or less follow EUR-USD higher. FX trade dried up early however, as dealers stepped to the sidelines in front of Friday's U.S. employment report. On the economic calendar, jobless claims were slightly lower than forecasts, while Q4 productivity firmed, and the December trade deficit widened a bit.

    [EUR, USD]
    EUR-USD popped to 1.3540 from 1.3510 after the ECB left its refi rate unchanged. Reaction was subdued initially, as traders held fire ahead of the press conference, where Draghi could announce other easing measures. Later though, EUR-USD continued to hold a bid, as Draghi pretty much threw cold water on further easing action now, and maybe next month as well. The pairing moved over the 1.3600 mark, touching 1.3617 highs. Offers parked at the figure were reportedly pulled, and moved to 1.3650. The ECB didn't see case for immediate action. Asked if there were calls for a cut already at this meeting Draghi didn't answer outright, but stressed that the discussion centered on the need for further information, which sounds as though even the doves at the council were uncertain whether additional steps are needed at the current junction. Clearly while the ECB is technically ready for a negative deposit rate, officials continue to worry about the implications, which suggests the bar for a cut is higher at the current juncture than back in November, when there was still more room on rates.

    [USD, JPY]
    USD-JPY reacted fairly strongly to this morning's uptick in risk taking levels. The pairing rallied from 101.25 lows to touch 102.00, its best levels since Monday. A good floor was put in place ahead of 101.00, with Japanese bids parked in front of the figure, which likely prompted some short covering. Option backed offers are now seen from 102.00.

    [GBP, USD]
    GBP saw some chop into and after the BoE decision, spiking higher in the minutes preceding the announcement before unwinding these gains with equal abruptness in the minutes following the announcement. Cable later recovered to the 1.6350 level after dipping to a 1.6286 low, as the pairing followed EUR-USD higher after teh ECB stood pat. Overall, the unchanged policy decision and lack of statement, which implies no change to the BoE's forward guidance stance.

    [USD, CHF]
    EUR-CHF was relatively steady through the session, though the lack of ECB action this morning helped the cross marginally higher, moving over 1.2240. After its brief move under 1.2200, the cross has been on a very gently upward sloping curve. USD-CHF meanwhile was dragged down by a broadly lower greenback, falling from 0.9060 to 0.8970, before reclaiming the 0.90 handle.

    [USD, CAD]
    USD-CAD rallied following the mix of data, where the Canadian trade deficit more than doubled expectations. The pairing shot up initially over 1.1090 from near 1.1050. Significant offers were not seen until the 1.1120 region, and indeed, USD-CAD posted 1.1122 highs before reversing lower. The better Ivey PMI out come resulted in a break back below 1.1100, and it later steadied near pre-trade data around 1.1060, as the market slowed ahead of the twin U.S./Canada employment reports on Friday.

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